Keeping sellers on as associates
Just like baseball, there are wins and losses in the strategies that are taken when buying or selling a dental practice. Each practice and staff is different, but there are some overall trends that often occur when dental practices change hands.
David Rice, DDS
“Yesterday’s home runs don’t win today’s games.” — Babe Ruth1
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Imagine for a moment that your dental practice is your favorite baseball team. Maybe it’s a professional team, or maybe it’s your child’s team. Either way, think about some of the major elements that impact the team’s success. These include the coach, the players, the game plan, the equipment, and the field on which the game is played.
Then ask yourself, is what Babe Ruth spoke the truth?
Now imagine your favorite baseball team is your dental practice. Maybe you’re the seller, or maybe you’re the buyer. In either case, think about all the related elements that define your dental team’s success. These include the dentist leader, the team, the systems, the equipment, and the facility.
Now how do you feel about Babe Ruth’s words?
If you’re anything like most people, I imagine it depends on which player you are in this game. Where buyers smile and give the Babe a pat on the back, sellers may grimace just a little and give him a slightly firmer pat on the back.
Either way, in the practice transition game, it is crucial for everyone to win. So as sellers sell and buyers buy, the question of the day is this: When is keeping the seller on as an associatea win, and when is it a loss?
Win: When the seller is a cagey veteran and the associate is a rookie
Cagey veteran sellers are the people we all want in our lineup when the playoffs roll around. As a rookie owner with a lot of debt and a little knowledge, the decision to keep that cagey vet in the lineup can dramatically accelerate your ability to win the big games ahead.
As the seller, you get to extend your career, lock in future earnings on top of the sale, and watch the dream team you’ve built win a few more championships. As the new buyer, you gain a mentor who can accelerate your success as a leader, a communicator, and, when this bonus is in play, a technology guru.
Loss: When the game has passed the seller by or the buyer is a cagey veteran already
The real value to the new buyer in this scenario is mentorship. This is the ability to fast-track skill sets that would otherwise take years to develop. When the seller has passed his or her prime and cannot deliver that mentorship, keeping the seller on as an associate beyond an initial three- to six-month transition period is no longer a win.
Win: When the practice has two or more doctors
When the practice supports or even requires a second dentist to shoulder the production, keeping the seller on as an associate is an incredible opportunity for everyone. The seller continues to build wealth. The buyer retains a proven producer who is liked and trusted by the team and patients. Imagine having a batter in your lineup who hits home runs all day, every day.
Loss: A single-doctor practice pretending to be more
This is a major strikeout. When a new buyer approaches a lender such as Wells Fargo, what is understood is the cost of the practice note as it pertains to paying the bills, and the new buyer’s ability to generate his or her income. When profit and loss statements and practice balance sheets show underperforming statistics, everyone in the game is at risk.
Win: When the seller helps define the new leader
Of all the lessons dental schools run out of time to teach, leadership just may be the biggest. With that, transitions can bring stress to the best of teams. Having the seller stay on as an associate is a tremendous strategy to maintain stability while maximizing the leadership lesson and minimizing team turmoil.
Loss: When the seller won’t let go
The risk to this leadership baton pass is the seller or the team who just won’t let go of the past. The new buyer must be outwardly anointed as captain of the team from day one. If the seller or the team continues to see the seller as the leader, confusion will run rampant and the new buyer will miss his or her opportunity to take the reins. When the seller is unhappy, guess who the team will follow?
Every great action plan needs a scoreboard. Milestones and timelines are key in practice transition success. On the short side, keeping the seller on as an associate can take three to six months. In this scenario, the associateship is more about a practice transition.
On the long side, 24 to 36 months is the maximum time frame experts such as Jonathan Miller of Fortune Management recommend.2 Clear definitions on the front end will avoid any challenges once the game has started. Time frames and milestones that define the practice’s success are objective means by which to assess, reassess, and retool as needed.
Like most life calls, the truth is usually somewhere in the middle. As we examine the words of Babe Ruth, what matters most—being right, or winning the game?
1. Babe Ruth quotes. Quotable quotes. Goodreads website. https://www.goodreads.com/quotes/7403089-yesterday-s-home-runs-don-t-win-today-s-games. Accessed September 24, 2018.
David Rice, DDS, is founder of the nation’s largest student and new dentist community, igniteDDS. Dr. Rice travels the world speaking and connecting today’s top young dentists with tomorrow’s most successful dental practices. In addition to igniteDDS, Dr. Rice maintains a team-centered restorative and implant practice in East Amherst, New York.